3rd Quarter GDP Growth Rate Revised to 2.0%

the Third Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services increased at a 2.0% annual rate in the quarter, revised from the 2.1% growth rate reported in the second estimate last month, as residential investment increased more than previously estimated and the growth of private inventory investment was smaller than previously estimated...in current dollars, our third quarter GDP grew at a 3.3% annual rate, increasing from what would extrapolate to $17,913.7 billion a year in the 2nd quarter to an annualized $18,060.2 billion in the 3rd quarter, with the headline 2.0% annualized rate of increase in real output arrived at after a deflator of 1.3% was applied to that current dollar change to adjust for inflation..

while we cover the details, remember that the press release for GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts...given the misunderstanding evoked by the oversimplified press release, all the data that we'll use in reporting the changes here will come from the pdf for the 3rd estimate of 3rd quarter GDP, which is linked to on the sidebar of the BEA press release...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since 2012, table 2, which shows the contribution of each of the components to the GDP figures for those months and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...the pdf for the 2nd estimate for the 3rd quarter, which this estimate revises, is here...

growth in real personal consumption expenditures (PCE), the largest component of GDP, was unrevised from the 3.0% annual growth rate reported last month, as a 4.3% increase in the rate of personal spending was deflated with an annualized 1.3% increase in the PCE price index, an inflation adjustment which remained unchanged from the second estimate....real consumption of durable goods grew at a 6.6% annual rate, which was revised from 6.5% in the second estimate, and added 0.47 percentage points to GDP, as real output of recreational equipment and vehicles consumed rose at a 10.2% annual rate and output of all other consumer durable categories also grew...real consumption of nondurable goods by individuals rose at a 4.2% annual rate, revised from the 4.0% increase reported in the 2nd estimate, and added 0.58 percentage points to 3rd quarter growth, as real consumption of gasoline and other energy goods grew at a 5.2% rate and all categories of non-durable consumption also saw growth...meanwhile consumption of services rose at a 2.1% annual rate, revised from the 2.2% rate reported last month, and which added 1.00 percentage points to the final GDP tally...an increase at a 3.6% rate in the real output of health care services led the services increase, as only real consumption of recreational services was slightly lower than it was in the second quarter...

seasonally adjusted real private domestic investment contracted at a 0.7% annual rate in the 3rd quarter, revised from the 0.3% contraction estimate made last month, as growth real private fixed investment was revised from a 3.4% rate to indicate growth at a 3.7% rate, while the contraction in inventory growth was larger than reported in the 2nd estimate...the contraction in investment in non-residential structures was revised from shrinking at a 7.1% rate to a contraction at a 7.2% rate, investment in equipment grew at a 9.9% rate, not the 9.5% growth rate previously reported, and the contraction in the 3rd quarter's investment in intellectual property products was unrevised at a 0.8% rate; meanwhile, growth in residential investment was revised higher, from a 7.3% rate to growth at an 8.2% rate annually…after those revisions, the contraction in investment in non-residential structures subtracted 0.21 percentage points from the 3rd quarter growth rate, increased investment in equipment added 0.57 percentage points to 3rd quarter growth, lower investment in intellectual property subtracted 0.03 percentage points, while growth in residential investment added 0.27 percentage points to 3rd quarter GDP...

meanwhile, the growth in real private inventories was revised from the previously reported $90.2 billion in real growth to show inventory growth at an inflation adjusted $85.5 billion rate, which came after inventories had grown at an inflation adjusted $113.5 billion rate in the 2nd quarter, and hence this quarter's $28.0 billion smaller real inventory growth, annualized, subtracted 0.71 percentage points from the 3rd quarter's growth rate, in contrast to the 0.59 percentage point subtraction from slower inventory growth reported in the second estimate....since slower growth in inventories indicates that less of the goods produced during the quarter were left "sitting on the shelf”, their decrease at a $28.0 billion rate means real final sales of GDP in the 3rd quarter were actually greater by that much, and hence real final sales of GDP grew at a 2.7% rate in the 3rd quarter, compared to the real final sales increase at a 3.9% rate in the 2nd quarter, when the change in inventories was insignificant, and when growth in real final sales was the same as growth in GDP…

the increase in real exports was revised lower with this estimate, while the increase in real imports was revised higher, and as a result our net trade was a greater subtraction from GDP than previously reported, as exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (hence not counted elsewhere), while increased imports subtract from GDP because they represent either consumption or investment that was not produced here....our real exports grew at a 0.7% rate rather than the 0.9% real export growth reported in the second estimate, and as a result added just 0.09 percentage points to 3rd quarter GDP growth...meanwhile, the real growth of our imports was revised to 2.3% from the previously reported 2.1% growth, and hence imports subtracted 0.35 percentage points from the quarter's growth rate...thus, our deteriorating trade balance subtracted a net 0.26 percentage points from 3rd quarter GDP, after an improving trade balance had added 0.18 percentage points to 2nd quarter growth...

finally, there were also small revisions to real government consumption and investment in this 3rd estimate, that essentially put every metric back to where it was in the 1st estimate...real federal government consumption and investment was seen to have grown at a 0.2% rate from the 2nd quarter in this estimate, revised from the 0.1% growth rate of the federal government reported in the 2nd estimate....real federal spending for defense was revised to show it shrinking at a 1.4% rate, rather than the 1.5% contraction rate last reported, subtracting 0.06% percentage points from 3rd quarter GDP, while all other federal consumption and investment grew at a 2.8% rate, rather than the 2.6% growth rate previously reported, and thus added 0.8 percentage points to GDP.....note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services....lastly, real state and local consumption and investment was revised from growing at 2.6% rate in the first estimate to growth at a 2.8% rate in this estimate, and hence added 0.39 percentage points to 3rd quarter GDP...

our FRED bar graph below, which can also be viewed as an interactive at the FRED site, has been updated with these latest GDP revisions...each color coded bar shows the real inflation adjusted change, expressed in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2012...in each quarterly grouping of seven bars on this graph, the quarterly changes in real personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in real private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and investment is shown in pink, and the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they did in the recent quarter, they'll appear below the zero line...it’s fairly clear from this graph that our personal consumption expenditures has underpinned GDP growth over this period, while increasing imports have been the major negative…

November Personal Income up 0.3%; 2 Months PCE Would Add 1.08 Percentage Points to Q4 GDP

other than the employment report and the GDP report itself, the monthly report on Personal Income and Outlays from theBureau of Economic Analysis is probably the most important economic release we see monthly, as it gives us the monthly data on our personal consumption expenditures (PCE), which accounts for more than 2/3rds of GDP, and the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated....this report also gives us monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those are not the current monthly change; rather, they're seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase for a year if November's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from October to November..

thus, when the opening line of the press release for this report tell us "Personal income increased $44.4 billion, or 0.3 percent, and disposable personal income (DPI) increased $34.5 billion, or 0.3 percent, in November", they mean that the annualized figure for seasonally adjusted personal income in November, $15,617.6 billion, was $44.4 billion, or a bit less than 0.3% greater than the annualized personal income figure of $15,573.2 billion extrapolated for October; the actual, unadjusted change in personal income from October to November is not given...similarly, annualized disposable personal income, which is income after taxes, rose by less than 0.3%, from an annual rate of an annual rate of $13,596.4 billion in October to an annual rate of $13,630.9 billion in November...likewise, all the contributors to the increase in personal income, listed under "Compensation" in the press release, are also annualized amounts, all of which can be more clearly seen in the Full Release & Tables (PDF) for this release...so when the press release says, "Wages and salaries increased $37.1 billion in November, compared with an increase of $47.2 billion in October", that really means wages and salaries would rise by $37.1 billion over an entire year if November's seasonally adjusted increase in wages and salaries were extrapolated over that year, just as rental income of individuals rose at a $5.7 billion annual rate and interest and dividend income, sometimes the largest contributor to the monthly personal income increase, fell at a $9.7 billion annual rate in November...so you can see what's written in the press release is misleading, and often leads to media reports that parrot those lines the same way the BEA wrote them, and why we favor referencing the pdf in reviewing this report...

for the personal consumption expenditures (PCE) that we're most interested in today, BEA reports that they increased at a $40.1 billion rate, or a bit more than 0.3 percent, as the annual rate of PCE rose from $12,390.5 billion in October to $12,430.7 in November; that happened as the October PCE figure was revised down from the originally reported $12,393.5 billion annually, and prior months were slightly revised as well....components of the current dollar increase in November spending were a $24.2 billion annualized increase to an annualized $4,029.7 billion in spending for goods and a $16.0 billion increase to $8,400.9 billion annualized in spending for services. ...total personal outlays for November, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $44.0 billion to $12,883.4 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $747.6 billion annual rate in November, down a bit from the revised $757.0 billion in annualized personal savings in October... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 5.5% in November from October's savings rate of 5.6%...

as you know, before personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....that adjustment is accomplished with the price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, also included in this report....looking at Table 9 in the pdf, we see that that index rose from 109.751 in October to 109.769 in November, a month over month inflation rate that's statistically 0.028%, which BEA reports as an increase of “less than 0.1 percent”, following the PCE price index increase of ~0.1% in October...since the inflation adjustment to PCE is so small, that left real PCE still statistically up 0.3% in November, after October's increase was revised to statistically unchanged from the previously reported 0.1% increase...note that when those price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in our familiar chained 2009 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....that result is shown in table 7 of the PDF, where we see that November's chained dollar consumption total works out to 11,323.4 billion annually, ~0.3% more than October's 11,290.0 billion...

however, in estimating the impact of the change in PCE on the change in GDP, the month over month change doesn't buy us much, since GDP is reported quarterly...thus we have to compare real PCE from October and November to the the real PCE of the 3 months of the third quarter...while this report shows PCE for those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in the GDP report which we reviewed earlier...in table 3 of the pdf for the GDP report, we see that the annualized real PCE for the 3rd quarter was represented by 11,262.4 million in chained 2009 dollars...by averaging the annualized chained 2009 dollar figures for October and November, 11,290.0 billion and 11,323.4 billion, we get an equivalent annualized PCE for the two months of the 4th quarter that we have data for so far....when we compare that average to the 2nd quarter real PCE, we find that 4th quarter real PCE has grown at a 1.6% annual rate for the two months we do have (note the math to get that annual rate: (((11,290.0 + 11,323.4) /2 ) / 11,262.4) ^ 4 = 1.0158268...this means that even if December real PCE does not improve from the average of October and November, growth in PCE would still add 1.08 percentage points to the growth rate of the 4th quarter...

real disposable personal income, or the purchasing power of disposable income, is arrived at in the same manner as we found real PCE; disposable personal income figures are adjusted for inflation using the PCE price index...even though that index was only up 0.028% in November, disposable personal income was only shown as up 0.3% for the month by virtue of upward rounding from a 0.2567% increase...hence, when that 0.028% increase in the PCE index was applied to that, it reduced real disposable personal income to a rounded increase of 0.2%, following a 0.3% increase in October...our FRED graph below shows annualized real disposable personal income in blue and real personal consumption expenditures in red monthly since January 2000, with the annualized scale in chained 2009 dollars for both shown in the current data box and on the lower left; also shown on this same graph in green is the monthly personal savings rate over the same period, with the scale of savings as a percentage of disposable income on the right...the spike in income and savings at the end of 2012 was mostly the result of income manipulation before the year end "fiscal cliff" of that year, while the earlier spikes were as a result of the tax rebates enacted as a fiscal stimulus under George Bush….

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for November (pdf) from the Census Bureau reported that the widely watched new orders for manufactured durable goods were virtually unchanged as they rose by less than a seasonally adjusted $0.1 billion to $238.77 billion in November, following a October increase of $6.7 billion or 2.9% that was revised from the previously reported $6.9 billion or 3.0% increase, and decreases of 0.8% in September and 2.9% in August...year to date new orders still remain 3.7% below the orders level of 2014, in part due to falling prices of some durable goods, such as primary metals and fabricated metal products, and in part due to the July through November shutdown of the Export-Import Bank, the financing vehicle for large export orders...as is usually the case, the volatile monthly change in new orders for transportation equipment drove the headline change, as those transportation equipment orders rose $0.3 billion or 0.4% to $82,183 million as a 1.5% increase to $52,432 million in new orders for automotive vehicles more than offset a 22.2% decrease to $13,442 million in new orders for commercial aircraft, which are now 36.9% below their year ago level year to date....excluding those new orders for transportation equipment, other new orders fell by more than 0.1% in November, as the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, fell 0.4% to $69,347 million, after the October change in orders for such capital goods was revised from a 1.3% increase to a 0.6% increase...

meanwhile, the seasonally adjusted value of November shipments of durable goods, which will be inputs into various components of 4th quarter GDP after adjusting for deflation, rose by $2.1 billion or 0.9% to $241.8 billion, after October's shipments were revised from a decrease of 1.0% to a decrease of 1.2%...again, greater shipments of transportation equipment drove the change, as they rose $2.3 billion or 2.9 percent to $80.8 billion, as the value of shipments of motor vehicles and parts rose 1.8% to $52,559 million and shipments of commercial aircraft rose 16.0% to $15,973; excluding that volatile sector, the value of other shipments of durable goods fell 0.1% to $160,996 million....meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for the 6th time in the past 7 months, dropping $1.1 billion, or 0.3 percent to $395.7 billion, after a 0.3% decrease in October that was originally reported as a 0.2% decline ...a $0.8 billion or 0.6% decrease to $129.8 billion in the value of inventories of transportation equipment was again a major factor, although lower inventories of primary metals, which fell 1.1%, likely reflected lower prices...

finally, unfilled orders for manufactured durable goods, which we consider a better measure of industry conditions than the widely watched but volatile new orders, were up for the second month in a row, rising by $1.9 billion or 0.2% to $1,194.0 billion after a 0.3% increase in October, again largely due to an increase in the backlog in orders for transportation equipment, which rose $1.3 billion or 0.2 percent to $799.5 billion, which you'll note is more than half the total of unfilled orders outstanding, as the $609,540 million backlog in commercial aircraft orders alone accounts for more than half of this metric...without the transportation equipment sector, November's unfilled orders increased by more than 0.1%, rising by $577 million to $394,551 million....however, compared to a year ago, the unfilled order book for durable goods is still 2.2% below last November's level, with unfilled orders for transportation equipment 2.3% below their year ago level...

New Home Sales Pace Remains Below a Half Million Annually

the Census report on New Residential Sales for November (pdf) estimated that new single family homes were selling at a seasonally adjusted rate of 490,000 new homes a year, which was 4.3 percent (±11.9%)* above the revised October rate of 470,000 new single family homes a year and 9.1 percent (±20.9%)* above the estimated annual rate that new homes were selling at in November of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether November new home sales rose or fell from those of October or even from those of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and subject to the largest revisions of any census construction series....hence, these initial reports are not very reliable and often see significant revisions...with this report; sales new single family homes in October were revised from the annual rate of 495,000 reported last month to a 470,000 a year rate, September's annualized home sale rate, initially reported at 468,000, was revised from 447,000 to 442,000, while the annual rate of August sales, revised from 552,000 to 513,000 last month, was revised down again, to 507,000...

the annual rates of sales reported here are extrapolated from the estimates of Census field reps, which showed that approximately 34,000 new homes sold in November, down from the 38,000 new homes that sold in October, which was revised down from the originally reported 41,000 home sold....in addition, the unadjusted estimate for September home sales was revised down again, from 34,000 to 33,000 after it was originally reported at 36,000, while the estimate for August sales, first reported at 45,000, was revised down to 41,000, after prior downward revisions to 43,000 and 42,000....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in November was $305,000, up from $286,900 in October, which was originally reported as $281,500, while the average November new home sales price was $374,900, up from $358,100 in October, and up from the average sales price of $358,800 in November a year ago....a seasonally adjusted estimate of 232,000 new single family houses remained for sale at the end of November, which represents a 5.7 month supply at the November sales rate, up from a 5.5 month supply in October....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales increased to 490,000 Annual Rate in November and Comments on November New Home Sales....

Existing Homes Sales Fell 10.5% to a 4.76 Million Annual Rate in November

also this week, the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell by 10.5% in November, projecting that 4.76 million homes would sell over an entire year if November sales were extrapolated over that year, the slowest pace of home sales in 19 months and 3.8% lower than the annual sales rate projected in November of a year ago...the annual rate of October home sales was revised from the originally reported 5.35 million home sales to 5.32 million, down from September's 5.55 million home sales rate....the NAR also reported that the median existing-home price for all housing types in November was $220,300, which was 6.3% higher than a year earlier and the 45th consecutive monthly year over year increase in home prices...the NAR press release, which is titled Existing-Home Sales Suffer Setback in November, Fall to Slowest Pace Since April 2014, is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, et al. you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we'll take a look at the raw data overview(pdf), which gives us a close approximation to the actual number of homes that sold each month...this indicates that roughly 351,000 homes sold in November, down 20.9% from the 444,000 homes that sold in October and unchanged from the 351,000 homes that sold in November last year...home sales were down sharply in every region of the country, ranging from a 17.3% decrease to 148,000 home sales in the South to a 26.4% decrease to 78,000 home sales in the Midwest....that same pdf indicates that the median home selling price for all housing types rose 0.5% from a revised $219,100 in October to $220,300 in November, while the average home sales price was $263,900, up 0.4% from the $262,800 average in October, and up 4.0% from the $253,800 average home sales price of November a year ago, with the regional average home sales prices ranging from a low of $202,700 in the Midwest to a high of $353,700 in the West...for additional coverage with long term graphs on this report, see Existing Home Sales declined in November to 4.76 million SAAR and A Few Random Comments on November Existing Home Sales by Bill McBride at Calculated Risk…

in addition, this week also saw the release of the first three regional Fed manufacturing indexes for December: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from -10.7 to -4.6, still the fifth negative monthly index reading in a row, indicating an ongoing recession in First District manufacturing, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell from +1.9 in November to -5.9, it's third negative reading in 4 months; and the Kansas City Fed manufacturing survey for November, which covers western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, and which reported its broadest composite index fell to –9 in December from +1 in November, its eighth negative reading out of the last nine months, indicating that their regional contraction, mostly in the energy industry, continues...

the consumer price index was unchanged in November as lower prices for food, energy and core goods offset higher prices for services...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices were flat in November after rising 0.2% in October and falling 0.2% in September...the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually fell in November to 237.336, from 237.838 in October, which left it statistically 0.5% higher than the 236.151 reading of November of last year...regionally, prices for urban consumers have risen 1.5% in the West, 0.3% in the South, and 0.3% in the Northeast while they have fallen 0.2% in the Midwest over the past year, with greater price increases within regions in cities of more than 1,500,000 people...since both food and energy prices fell in November, core prices, which exclude food and energy, rose by 0.2% for the month, as the unadjusted core index rose from 243.985 to 244.075, a level 2.02% ahead of its year ago reading of 239.248...

the seasonally adjusted energy price index fell by 1.3% in November after rising 0.3% in October and falling by 4.7% in September, as the energy index remains 14.7% lower than it was in November a year ago...prices for energy commodities were 2.4% lower in November while the index for energy services saw a 0.1% decrease, after increasing 0.2% in October....the decrease in the energy commodity index was largely due to a 2.4% drop in the price of gasoline, the largest component, while fuel oil prices fell 1.3% and prices for other fuels, including propane, kerosene and firewood, averaged a 1.2% decrease…within energy services, the index for utility gas service fell by 1.9%, leaving utility gas priced 11.7% lower than a year ago, while the electricity price index rose by 0.3%, after it rose by 0.4% in October...energy commodities are still priced 24.2% below their year ago levels, with gasoline 24.1% lower priced than it was a year ago, while the energy services price index is 2.4% lower than last November, as even electricity prices have fallen 0.2% over that period...

the seasonally adjusted food index fell by 0.1% in November, after rising 0.1% in October, 0.4% in September and 0.2% in both July and in August, as prices for food at home fell 0.3% while prices for food away from home rose 0.2%, as average prices at both fast food outlets and at full service restaurants rose 0.2%...meanwhile, prices for all categorizes of food at home except for fruits and vegetables fell in November, with fruits and vegetables seeing a 0.6% increase on a 1.3% price increase for canned fruits and vegetables, while a 0.1% decrease in fresh fruit prices partially offset a 0.9% increase in fresh vegetable prices, led by a 4.7% increase in prices for tomatoes....in the other food at home categories, the index for cereals and bakery products fell 0.5% on 1.0% lower priced breakfast cereals, 0.9% lower flour and mixes, and 2.2% lower cookies, while bread rose 0.4%...prices for the meats, poultry, fish, and eggs group fell 0.6% on a 1.4% drop in beef and veal prices and a 3.8% drop in egg prices while poultry prices rose 0.5% and fish & seafood prices averaged 0.2% higher... the index for dairy products also fell 0.6% on 1.0% lower milk prices, while prices for cheese and related products were unchanged... the index for beverages and beverage materials was 0.5% lower on a 1.2% drop in coffee prices and 0.8% lower priced noncarbonated juices and drinks, both frozen and unfrozen...and lastly, prices in the other foods at home category averaged 0.3% lower...just two food line items have seen price changes greater than 10% over the past year; egg prices remain 23.7% higher than a year ago, despite dropping 4 months in a row, while ham prices, which were down 1.8% in November, are now 13.1% lower than they were in November a year ago...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.2% in October, the composite of all commodities less food and energy commodities fell by 0.2%, while the composite for all services less energy services rose by 0.3%....among the commodity components, which will be used by the BEA to adjust October retail sales for inflation in national accounts data, the index for household furnishings and supplies fell 0.3% on a 1.7% cut in prices for major appliances, a 3.2% drop in prices for clocks, lamps, and decorator items, and a 2.7% decrease in prices for dishes and flatware; apparel prices were also down 0.3% on a 5.0% reduction in prices for women's outerwear and 4.7% lower prices for men's suits, sport coats, and outerwear, partially offset by 2.3% higher prices for men's furnishings and a 1.8% in prices for boy's clothing... prices for transportation commodities less fuel were unchanged as 0.2% lower new car prices offset 0.2% higher new truck prices and a 0.7% drop in prices for car parts other than tires....medical care commodities, on the other hand, rose 0.3% on 0.4% higher prices for prescription drugs, while recreational commodities were 0.6% lower on a 1.7% decrease in prices for pets and pet supplies, a 1.6% decrease in prices for audio discs, tapes and other media and 1.5% lower priced TVs...in addition, education and communication commodities fell 0.4% on a 1.9% decrease in prices for telephone hardware, calculators, and other consumer information items and a 1.2% decrease in prices for software, offset by a 0.6% increase in prices for educational books and supplies, while the index for alcoholic beverages fell 0.1%, and the index for other goods was unchanged...

within services, the price index for shelter rose 0.2% on a 0.2% increase in rent, a 0.2% increase in owner's equivalent rent and a 1.0% increase in costs for lodging away from home, while costs for household services like water, sewer and trash collection services rose 0.4%....medical care services rose 0.4% on a 1.1% increase in physician's services and a 0.7% in health insurance, and transportation services rose 0.6% on a 1.4% increase in car and truck leasing and a 1.1% increase in costs for vehicle insurance while ground intercity transportation such as bus fares fell 1.6%...meanwhile, the recreation services index was unchanged as a 1.7% drop in film processing and a 1.5% decrease in video rentals were offset by 0.4% higher cable and satellite television service and 0.6% higher admissions to movies, theaters, and concerts...education and communication services were 0.3% higher on a 1.4% increase in delivery services and 0.7% higher wireless telephone services, and other personal services rose 0.2% on a 0.4% increase in haircuts and similar personal care services...other than the aforementioned ham and eggs and energy prices, only telephones, which were priced 13.4% lower, and televisions, which are 12.0% cheaper, saw their prices change by more than 10% over the past year...

with this release, we are now able to estimate the economic impact of last week's November retail sales report...for the most accurate estimate, and the way the BEA figures GDP, we should take each type of retail sales and adjust it with the appropriate change in price to determine real sales; ie, for November's clothing sales, which increased by 0.8%, should be adjusted with the price index for apparel, which was down by 0.3%, to show us that real retail sales of clothing were actually up 1.1% in November...then, to get GDP relevant changes, we'd have to compare those real clothing sales in November to real sales in the 3rd quarter months of July, August and September, and then repeat that for each other type of retailer, obviously quite tedious...the short cut we usually use for a ballpark estimate is to apply the composite price index of all commodities less food and energy commodities, which was down 0.2%, to retail sales less grocery, gas station, and restaurant sales, which account for nearly 70% of the aggregate sales....those sales were up 0.2% in November, and since their price index was down 0.2%, real retail sales ex food and energy was up 0.4%...in the food and energy components, grocery stores sales were up 0.8% while prices for food at home were down 0.3%, meaning real food sales rose by 1.1% in November; sales at bars and restaurants were up 0.7% in dollars, but those dollars bought 0.2% less, so real sales of food away from home was up 0.5%...and while gas station sales were down 0.8%, gasoline prices were down 2.4%, suggesting a solid real increase in gasoline sold as well...weighing the food and energy components at one third of total retail sales suggests that real retail sales were up on the order of 0.5% in November, following an October when a 0.1% increase in retail sales was boosted to real sales of 0.2% by the inflation adjustment...together, these suggest a strong contribution from personal consumption of goods in the advance 4th quarter GDP report, which will be released at the end of January...

Industrial Production Down 0.6% in November on Warm Weather, Lower Coal and Oil Drilling

industrial production fell again in November, but two thirds of the drop was due to a warm month, reducing the need for heating...the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.6% in November after falling by a revised 0.4% in October and 0.1% in September, and is now 1.2% below it's year ago level...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 106.5 in November from 107.1 in October, which was originally reported at 107.2...meanwhile, the September reading for the index was revised up from 107.4 to 107.5, and the August reading was revised from 106.6 to 106.7...thus, to the extent that this report plays into GDP, the increases in August and September industrial production imply an upward revision to 3rd quarter growth in those market group where production was revised, while the weaker 4th quarter index levels imply a subtraction from 4th quarter growth in those GDP components responsible, such as household utilities consumption expenditures...

the manufacturing index was unchanged at 106.2 in November, as the index for October was revised down from 106.3, the manufacturing index for September was left unchanged at 105.9, while the manufacturing index for August was revised from 106.0 to 106.1...however, the year over year increase in the manufacturing index has now been reduced to 0.9% from last month's 1.9%, as last November had seen a 1.1% increase... meanwhile, the mining index, which includes oil and gas well drilling, fell by 1.1% in November after falling a revised 2.4% in October, and at 111.3 it's now 8.2% below its level of November a year ago...finally, the utility index, which often fluctuates wildly due to above or below normal temperatures, fell by 4.3% in November after a 2.8% drop in October, as the decreases in both months were due to warmer than normal temperatures, reducing the need for heating...at 97.6, the utility index is now 7.6% lower than it was in November a year ago, and at the lowest level since the extraordinarily warm month of March 2012...

production among the major market groups was broadly lower in November, with a 0.2% increase in production of business equipment, led by a 0.7% increase in output of Information processing equipment, the only market group to see an increase...production of consumer goods fell 0.5%, as output of consumer durable goods was down 0.2% on an 0.8% decrease in production of automotive products, a 0.9% decrease in output of household durables such as furniture and appliances, and a 1.4% drop in output of home electronics, while production of non-durables fell by 0.6% on a 4.8% drop in the output of consumer energy products and a 1.1% decrease in production of clothing...production of defense and space equipment was down 0.2%, production of construction supplies also slipped 0.2%, and production of business supplies fell 0.7%...in addition, output of intermediate materials to be used in later industrial processes fell 0.8% on a 2.4% drop in production of consumer parts... further details for industrial production by market group, including the changes for each of the last 6 months, 3 quarters and 3 years, can be found on Table 1 and Table 4 of the report, with table 1 showing the percentage change from the prior month, quarter or year, and table 4 giving the new index and subindex values for the same...

this report also gives us capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which fell from 77.5% in October to 77.0% in November.... seasonally adjusted capacity utilization for all manufacturing industries was down 0.1% to 76.2% in November as manufacturing capacity utilization for October was revised from 76.4% to 76.3%...after a 0.2% upward revision to October, utilization of NAICS durable goods production facilities fell from 76.4% in October to 76.1% in November, while capacity utilization for non-durables rose from 77.5% to 77.9% after October capacity utilization for non-durables was revised down 0.4%....capacity utilization for mining fell from 80.5% in October to 79.4% in November, while utilities were operating at 74.5% of capacity during November, down from the revised 77.9% usage rate in October...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....

New Housing Starts and New Building Permits Increased in November

the November report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing unit starts was at a seasonally adjusted annual rate of 1,173,000 in November, which was 10.5 percent (±8.6%) above the revised October estimated rate of 1,161,000 housing units started annually and 19.5 percent (±2.0%) above last November's rate of 1,079,000 housing starts a year...the figures in parenthesis show the most likely range of the change indicated; in other words, November housing starts could have been up as little as 1.9% or as much as 19.1% from those of October, with even larger revisions subsequently possible...in this report, the annual rate for October housing starts was revised from the 1,060,000 reported last month to 1,161,000, while September starts, which were first reported at 1,206,000 annually, were revised from last month's initial revised figure of 1,191,000 annually back up to 1,207,000 annually with this report.....those annual rates of starts indicated by the annualized headline change were extrapolated from a survey of a small percentage of permit offices visited by Census field agents, which estimated that 89,800 housing units were started in November, down from 89,900 units started in October, which was initially estimated at 92,200 housing starts...of those housing units started in November, an estimated 55,500 were single family homes and 38,800 were units in structures with more than 5 units, down from 58,800 single family starts but up from 30,100 units started in structures with more than 5 units in October....the unadjusted estimates also show that housing starts were down in the Northeast and in the Midwest, while they were up in the South and statistically unchanged in the West, with only the 4,700 increase to 46,300 starts in the South greater than the statistical margin of error for its region....

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised starts data...in November, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,289,000 housing units, which was 11.0 percent (±1.6%) above the revised October rate of 1,161,000 permits annually and 19.5 percent (±2.0%) above the rate of permit issuance in November a year earlier...again, the estimates for new permits reported here were extrapolated from the unadjusted estimate, which showed permits for 90,800 housing units were issued in November, which was actually down from the estimated 98,200 new permits issued in October, with permits in the South down 7,100 to 42,700, and permits in the West showing the only monthly increase...the November permits included 49,000 permits for single family homes, down from 59,400 single family permits in October, and 39,800 permits for housing units in apartment buildings with 5 or more units, up from 35,700 such multifamily permits a month earlier...for charts and additional analysis on this report, see Bill McBride's coverage in two posts: Housing Starts increased to 1.173 Million Annual Rate in November and Comments on November Housing Starts....

November Retail Sales Increase 0.2% as Auto Dealer Sales Fall Again

seasonally adjusted retail sales rose 0.2% in November after retail sales for both October and September were revised a bit lower...the Advance Retail Sales Report for November (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $448.1 billion, which was an increase of 0.2 percent (±0.5%) from October's revised sales of $447.1 billion and 1.4 percent (±0.7%) above the sales of November of last year...October's seasonally adjusted sales were revised from the $447.3 billion first reported to $447.1 billion, while September's sales, which were revised down to $447.0 billion from the originally reported $447.7 billion last month, were revised down again, to $446.855 billion with this report, revisions which were not statistically significant enough to change the month over month sales percentage changes...estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales actually fell 0.3%, from $444,984 million in October to $443,714 in November, while they were up 1.5% from the $437,196 million of sales in November a year ago, surprisingly showing just a small seasonal adjustment to this month’s report...while we can't judge the economic impact of this month's report until the consumer price index is released next week, the revision to September sales should reduce 3rd quarter GDP by about 0.03 percentage points...

included below is the table of monthly and yearly percentage changes in sales by business type taken from the Census pdf, which you should all be familiar with by now.....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business type from October to November in the first sub-column, and then the year over year percentage change for those businesses since last November in the 2nd column; the second pair of columns gives us the revision of last month’s October advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the September to October change under "Sep 2015 revised" and the revised October 2014 to October 2015 percentage change in the last column shown...for your reference, the table of last month’s advance October estimates before this month's revision is here....

>looking at the above table, it's clear that a surprise 0.4% decrease to $93,683 million in seasonally adjusted sales at automobile and parts dealers was largely responsible for the November sales weakness; without the nominal drop in automotive sales, other retail sales increased by 0.4% to $354,434 million...0.8% lower sales gasoline stations were also a drag, but at $34,478 million they're a smaller part of the aggregate than they were when gasoline prices were higher...meanwhile, retailers showing above average increases in November sales included grocery stores, where sales were up 0.8% to $50,990 million, clothing stores, where sales were also up 0.8% to $21,313 million, specialty shops such as sporting goods and book stores, where sales also rose 0.8% to $7,572 million, general merchandise stores, where sales rose 0.7% to $57,205 million, miscellaneous store retailers, where sales rose 0.7% to $10,161 million, bars and restaurants, where sales also rose 0.7% to $52,957 million, electronics and appliance stores, where sales rose 0.6% to $8,746 million, and miscellaneous store retailers, where sales rose 0.6% to $10,161 million...building material and garden supply stores, with a 0.3% decrease in sales to $27,869 million, and furniture stores, also with a 0.3% decrease in sales to $8,779 million, were the only core retail groups to see lower nominal sales in November...

Producer Prices increased 0.3% in November on Higher Margins for Retailers

the seasonally adjusted Producer Price Index (PPI) for Total Final Demand unexpectedly increased in November as prices for finished wholesale goods fell by 0.1%, while margins of final services providers were 0.5% higher...this followed a October report that showed the overall PPI down 0.4%, with prices for finished goods down 0.4% while final demand for services was down 0.3%....producer prices remain 1.1% lower than they were a year ago, as the November increase was only the third in the last 12 months...

as noted, the index for final demand for goods, aka 'finished goods', fell by 0.1% in November after falling 0.4% in October, 1.2% in September and 0.6% in August, as the index for wholesale food prices was up 0.3% after back to back 0.8% decreases, as an 11.6% increase in wholesale prices for fresh fruit and a 10.8% increase in the wholesale price for fresh eggs offset lower wholesale prices for several other foods...meanwhile, the index for wholesale energy prices fell 0.6% as wholesale prices for home heating oil and distillates were down 5.2% and wholesale residential natural gas prices fell 3.1%...excluding food and energy, the index for final demand for wholesale core goods was 0.1% lower in November, as a 1.1% decrease in wholesale prices for industrial chemicals and a 1.0% increase in wholesale prices for sporting and athletic goods were the only core finished goods to see a price change greater than 1% for the month...

meanwhile, the index for final demand for services rose by 0.5% in November after falling by 0.3% in October and 0.4% in September, as the index for final demand for trade services rose 1.2%, the index for final demand for transportation and warehousing services rose 0.3%, and the index for final demand for services less trade, transportation, and warehousing services was 0.1% higher....among trade services, seasonally adjusted margins for fuels and lubricants retailers were 8.7% higher, margins for flooring and floor coverings retailers were 7.1% higher, and margins for clothing, jewelry, footwear, and accessories retailers increased by 6.2%, while computer hardware, software, and supplies retailers saw their margins contract by 5.5%...among transportation and warehousing services, a 1.3% decrease in margins for air transportation of freight only partially offset an increase in margins for other transportation and warehousing services, while in the core final demand services, a 3.9% increase in margins for portfolio management and a 3.2% increase in margins on consumer loans were offset by a 3.9% decrease in margins for securities brokerage, dealing, investment advice, and related services and a 3.6% decrease in the profitability of mining services...

this report also showed the price index for processed goods for intermediate demand fell by 0.6% after a 0.4% decrease in October, as intermediate processed goods prices have now been down 14 out of the last 16 months and are 7.1% lower than in November a year ago....all intermediate goods indices were down for the month, with prices for intermediate energy goods 1.7% lower, the index for processed foods and feeds 0.4% lower, while the price index for processed goods for intermediate demand less food and energy was down 0.4%...meanwhile, the price index for intermediate unprocessed goods fell 5.1% in November after being unchanged in October and falling 3.1% in September and 4.4% in August, as all of the raw material indexes also fell, with the index for crude energy goods down 9.2%, the index for unprocessed foodstuffs and feedstuffs down 3.0%, and producer prices for raw materials other than food and energy materials 3.4% lower... this raw materials index is now 26.6% lower than it was a year ago, as commodity prices continue to hit 16 year lows...

finally, the price index for services for intermediate demand was unchanged in November after falling by 0.4% in October and 0.7% in September, as a 0.1% decrease in the index for trade services for intermediate demand offset a 0.2% increase in the index for transportation and warehousing services for intermediate demand and a 0.1% increase in the the price index for services less trade, transportation, and warehousing for intermediate demand...within such intermediate services, an 0.8% increase in margins for intermediate courier, messenger, and postal services offset a 3.7% decrease in margins for intermediate paper and plastics products wholesalers...over the 12 months ended in November, the year over year price index for services for intermediate demand, which has never turned negative, is still 0.5% higher than it was a year ago...

A Note on Revisions to Import Prices

in addition to producer prices, this week also saw the Import and Export Price Indexes for November from the BLS, which indicated import prices declined 0.4% and export prices declined 0.6%, price changes that will be used to adjust November trade figures for deflation when they're released the first week of January next year...however, with this release, the decrease in import prices for October was revised from -0.5% to -0.3%, while the decrease in import prices for September was revised from -0.6% to -1.1%...these price revisions will have the effect of decreasing real imports for October by ~0.2% from the previously published amount, and increasing real imports for September by ~0.5% in their inclusion in 3rd quarter GDP...thus we'll revise our estimates of the economic impact of the October international trade report to indicate that our deteriorating balance of trade in goods in October will subtract about 0.40 percentage points from the growth of 4th quarter GDP, while the revision to 3rd quarter trade data combined with the change in September prices will subtract 0.10 percentage points from the previously published Q3 GDP figures…

October Wholesale Sales Unchanged, Inventories Down 0.1%

the value of both wholesale sales and wholesale inventories were down slightly in October, a month when producer prices for finished goods were down 0.4%...the October report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $448.0 billion, statistically unchanged (+/-0.5)* from the revised September level of $448.2 billion, and were down 3.7 percent (+/-1.4%) from the value of wholesale sales of a year earlier...the September preliminary estimate was revised upward $0.2 billion, and hence the value of wholesale sales reported in October was virtually identical to what was initially reported for last month....wholesale sales of durable goods were down 0.8 percent (+/-0.9%)* from last month and were down 2.2 percent (+/-1.8%) from a year earlier, with wholesale sales of furniture 3.4% higher than in September while wholesale sales of motor vehicles and parts fell 2.6%...wholesale sales of nondurable goods were up by 0.7 percent (+/-0.9%)* from September, but were down 5.1 percent (+/-1.8%) from last October, with wholesale sales of petroleum and petroleum products up 2.9%, and wholesale sales of farm products up 3.4% on the month, even with lower prices...as an intermediate activity, wholesale sales are not included in GDP except as a trade service, since they do not represent an increase in the output of the goods sold....

on the other hand, the monthly change in private wholesale inventories is a major factor in GDP, as additional goods “on the shelf” represent goods that were produced, and the Census estimated they were valued at $585.9 billion at the end of October, 0.1 percent (+/-0.5%)* lower than the revised September level but 3.6 percent (+/-1.6%) above the valuation of last October's inventories, while September's preliminary inventory estimate was revised down by $1.5 billion or 0.3%, and hence October wholesale inventories are actually 0.4% lower than the $588.1 billion reported last month for September....wholesale durable goods inventories were down 0.1 percent (+/-0.4%)* from September but 2.5 percent (+/-1.8%) higher than a year earlier, as the value of inventories of vehicles and parts were 1.0% higher than June, while the value of inventories of metals and minerals were down 1.1%...inventories of nondurable goods were valued 0.1 percent (+/-1.4%)* lower than September, but were valued 5.4 percent (+/-2.1%) higher than last October, as the value of inventories of raw farm products was down 5.4% while the value of inventories of drugs and druggists' supplies was 1.1% higher than in September...with the October producer price index for finished goods down by 0.4% on 0.8% lower food prices, while intermediate wholesale prices also fell 0.4%, real wholesale inventories appear to be up on the order of 0.3% from September, but probably not enough to make a positive contribution to 4th quarter GDP...meanwhile, the downward revision of September inventories will likely clip another 0.03 or 0.04 percentage points off of the 3rd quarter growth rate...

Nominal Business Inventories Virtually Unchanged in October

following the release of retail sales report, Census released the composite Manufacturing and Trade Inventories and Sales report for October (pdf), which incorporates the revised October retail data and gives us a complete picture of the business contribution to the economy for that month...according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,317.7 billion in October, down 0.2 percent (±0.2%)* from September's revised sales, and down 2.7 percent (±0.5%) from October sales of a year earlier...note that total September sales were revised down by less than $0.1 billion, from $1,320.3 billion to $1,320.2 billion....manufacturer's sales fell by 0.5% from September's sales to $475,173 million in October, retail trade sales, which exclude restaurant & bar sales from the revised October retail sales reported earlier, were statistically unchanged at $394,562 million, and wholesale sales were also statistically unchanged at $447,978 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be at a seasonally adjusted $1,814.5 billion at the end of October, virtually unchanged (±0.2%) from September but 2.0 percent (±0.5%) higher than in October a year earlier...seasonally adjusted inventories of manufacturers were estimated to be valued at $645,129 million, 0.1% less than in September, inventories of retailers were valued at $584,283 million, 0.1% greater than September, and inventories of wholesalers were estimated to be valued at $588,120 million at the end of October, down 0.1% from September...last week we judged that due to lower producer prices, an increase in real factory inventories for October could result in a small boost to 4th quarter GDP; earlier today, we hedged on the impact of wholesale inventories...since October retail inventories will be inflated by the 0.4% decrease in producer prices for finished goods for that month, we'd judge that the 0.5% increase in real retail inventories could also add incrementally to 4th quarter GDP...that judgment comes with the warning that virtually no other analysis of October inventories agrees with me on that...

October Job Openings and Layoffs Down, Hires and Quits Up

the Job Openings and Labor Turnover Survey (JOLTS) report for October from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 151,000, from 5,534,000 in September to 5,383,000 in October, after the September increase of a similar magnitude was revised from 5,526,000 to 5,534,000....October jobs openings were still 14.1% higher than the 4,849,000 job openings reported in October a year ago, as the ratio of the unemployed to openings rose from 1.43 in September to 1.47 in October....job openings fell most prominently in the broad-professional and business services category, where they were down by 137,000 to 1,067,000; job openings in other categories were changed little (see table 1 for more details)...like most BLS releases, the press release for report is easily readable and also refers us to the associated table for the data cited, linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in October, seasonally adjusted new hires totaled 5,137,000, up 57,000 from the revised 5,080,000 who were hired or rehired in September, as the hiring rate as a percentage of all employed remained unchanged at 3.6%, which was down from the hiring rate of 3.7% in October a year earlier (details of hiring by industry since June are in table 2)....meanwhile, total separations fell by 23,000, from 4,886,000 in September to 4,863,000 in October, as the separations rate as a percentage of the employed also remained unchanged at 3.4%, while it was also down from the separations rate of 3.5% a year ago (see table 3)...subtracting the 4,863,000 total separations from the total hires of 5,137,000 would imply an increase of 274,000 jobs in October, a bit lower than the revised payroll job increase of 289,000 for October reported by the November establishment survey last week, not an unusual difference and well within the expected margin of error in these incomplete samplings...

Mortgage Delinquencies and Foreclosures Fall in October; Mean Time in Foreclosure at 1057 Days

the Mortgage Monitor for October(pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 721,435 home mortgages, or 1.43% of all mortgages outstanding, remaining in the foreclosure process at the end of October, which was down from 737,254, or 1.46% of all active loans that were in foreclosure at the end of September, and down from 1.81% of all mortgages that were in foreclosure in October of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and the October "foreclosure inventory" remains the lowest percentage of homes that were in the foreclosure process since late 2007... new foreclosure starts were also the lowest since July, falling to in 73,218 October from 79,899 in September, and while they've been volatile from month to month, new foreclosure starts remain in a range about 50% higher than number of new foreclosures we saw in the precrisis year of 2005...

in addition to homes in foreclosure, BKFS data showed that 2,414,583 mortgages, or 4.77% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure in October, down from 4.87% of homeowners with a mortgage who were more than 30 days behind in September, but still up from this year's lowest delinquency rate of 4.66% in March, while still down from the mortgage delinquency rate of 5.42% in September a year earlier...of those who were delinquent in October, 819,617 home owners, or 1.62% of those with a mortgage, were considered seriously delinquent, meaning they were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month...combining these totals, we find a total of 6.20% of homeowners with a mortgage were either late in paying or in foreclosure at the end of September, and 3.05% of them were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

as you know, the Mortgage Monitor (pdf) is a mostly graphics presentation from what was once the Analytics division of Lender Processing Services that covers a variety of mortgage related issues each month...when we initiated coverage of it 5 years ago, it was heavily focused on the various aspects of the mortgage crisis, and included dozens of related graphs...this October report includes none of that; its focus is on the distribution of high loan-to-value mortgages, changes in the cash share of purchase transactions, the performance of second lien home equity lines of credit (HELOCs) facing draw period expirations through the end of 2018, and home prices...so we’ll just include below that part of one Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 16 of the pdf....

the columns in the table below show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month over the past and for each January shown going back to January 2005….in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…the average length of delinquency for those who have been more than 90 days delinquent without foreclosure slipped from the April record of 536 days and is now at 514 days, while the average time for those who’ve been in foreclosure without a resolution is also off its record high set in August but is still nearly three years at 1057 days…

privately issued reports this week included the report on light vehicle sales for November from Wards Automotive, which estimated that vehicles sold at a 18.12 million annual rate in November, the same annual rate as in October, and only the first time US auto sales have topped the 18 million rate three months in a row....we also saw the release of the Chicago Purchasing Managers Index (PMI) for November, which reported their Chicago Business Barometer fell 7.5 points, from 56.2 in October to 48.7 in November, in a manufacturing diffusion index where readings below 50 indicate that a plurality of area purchasing managers saw a slowdown in various facets of their business...in addition, the week also saw the release of the two widely watched diffusion indexes from the Institute for Supply Management (ISM), the November Manufacturing Report On Business, which saw the manufacturing PMI (Purchasing Managers Index) slip from 50.1 in October to 48.6 in November, the lowest reading since June 2009, indicating a contraction in manufacturing firms nationally, and the November Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.9%, down from 59.1% in October, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business...both of those reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally..

November Payroll Jobs up by 211,000; Involuntary Part Time Workers Up by 319,000

the Employment Situation Summary for November showed a modest increase in payroll employment and a similar increase in those who reported they were employed, while the average workweek slipped and involuntary part time work increased....estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 211,000 jobs in November, after the payroll job increase for September was revised up from 137,000 to 145,000, and the October jobs increase was revised up from 271,000 to 289,000, making the combined number of jobs going into October 35,000 more than was previously reported ….October job increases were spread through construction, government, and the private service sector, with just the motion picture and sound recording industries shedding 13,400 jobs, the resource extraction sector seeing a loss of 11,000 jobs, and manufacturing industries seeing a net decrease of 1,000 jobs...construction trades led the payroll job increases, with a jump of 46,000 jobs, 25,800 of which were with residential specialty trade contractors, followed by the leisure and hospitality sector, where 39,000 jobs were added, 31,500 of which were in bars and restaurants....27,000 jobs were added in the broad professional and business services category, with the increase of 28,400 jobs in professional and technical services, of which 11,000 were in accounting and bookkeeping...the health care and social assistance sector added 32,200 jobs, with the addition of 13,400 jobs in hospitals, while another 30,700 seasonally adjusted jobs were added in retail, even as clothing and accessories stores appeared to have shed 14,200 jobs in November...(note that actual retail jobs increased by 394,100 in November, of which 79,400 were new jobs in clothing stores; however, a number of clothing stores that normally hire in November apparently hired in October this year, and hence the seasonally adjusted count for clothing store jobs showed an increase in October offset by a decrease vis a vis the normal gain in November)....employers also reported that average hourly earnings for all employees rose by 4 cents to $25.25 after an October increase of 9 cents, dropping the wages gain over the last 12 months to 2.3%...meanwhile, the average workweek for all private employees was slipped a tenth of an hour to 34.5 hours, although the factory workweek and factory overtime were both unchanged, at 40.7 hours and 3.2 hours, respectively...

meanwhile, the November household survey estimated that the seasonally adjusted count of those who were employed rose by 244,000 to 149,364,000, while the number of unemployed rose by 29,000 to 7,937,000, which left the unemployment rate unchanged at 5.0%...with the increase in the number employed and unemployed greater than the 206,000 increase in the civilian working age population, the count of those not in the labor force fell by 67,000 to 94,446,000, which was enough to increase the labor force participation rate from 62.4% in October to 62.5% in November, still just a bit more than 0.1% off a 38 year low ...with the modest increase in the employed, the employment to population ratio, which we could think of as an employment rate, remained unchanged at 59.3%...however, there was a 319,000 jump in the number who reported they were involuntarily working part time, up from 5,767,000 in October to 6,086,000 in November...as a result, the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", rose by 0.1% to 9.9%...

like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there...note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page...thus, if you should see lines of interest while you're reading it such as "In November, 1.7 million persons were marginally attached to the labor force, down by 392,000 from a year earlier. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)", you can quickly open Table A-16, where you will find that of the 1,717,000 so-called marginally attached workers, 594,000 were considered discouraged workers, because they said they didn't look for work over the prior 4 weeks because they believed no jobs are available for them due to their lack of education, their age, or other type of discrimination...

October Trade Deficit Increased 3.3%; Deficits for July, August and September Revised Higher

our trade deficit rose by 3.3% October, after falling by a revised 12.9% in September, as the net value of both our exports and imports decreased....the Census report on our international trade in goods and services for October indicated that our seasonally adjusted goods and services trade deficit rose by $1.4 billion to $43.9 billion in October from a September deficit which was revised from $40.8 billion to $42.5 billion ....the value of our October exports fell by $2.7 billion to $184.1 billion on a $3.1 billion decrease to $123.8 billion in our exports of goods which was partially offset by an increase of $0.4 billion to $60.3 billion in our exports of services, while our imports fell $1.3 billion to $228.0 billion on a $1.0 billion decrease to $186.8 billion in our imports of goods and a $0.2 billion decrease to $41.1 billion in our imports of services...export prices averaged 0.2% lower in October, so the real growth in exports was greater by that percentage, while import prices were 0.5% lower, similarly incrementally increasing growth in real imports...

the drop in our October exports included significant decreases in our exports of industrial supplies, capital goods, foods and feeds, and consumer goods...referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials fell by $1,609 million to $33,575 million on a $443 million drop in our exports of fuel oil, a $417 million drop in our exports of other petroleum products, a $183 million drop in our exports of fertilizers, and decreases in excess of $100 million in our exports of non-ferrous metals not otherwise listed, other unlisted chemicals, non-monetary gold and unmanufactured agricultural materials...our exports of capital goods fell by $928 million to $44,409 million on a $515 million decrease in our exports of industrial engines, a $457 million decrease in our exports of civilian exports, and a $345 million decrease in our exports of electrical apparatuses which were partially offset by a $565 million increase in our exports of telecommunications equipment...our exports of foods, feeds and beverages fell by $589 million to $10,209 million on a $203 million drop in our exports of corn, a $146 million drip in our exports of wheat, and a $145 million drop in our exports of nuts, which were partially offset by a $145 million increase in our exports of soybeans...our exports of consumer goods fell by $516 million to $16,515 million on decreases of $352 million in our exports of artworks and antiques and $316 million in our exports of jewelry...in addition, our exports of automotive vehicles, parts and engines fell by $162 million to $12,783 million, while only our exports of goods not categorized by end use rose saw an increase in October, rising by $813 million to $5,947 million.

Exhibit 8 in the Full Release and Tables gives us details on our imports and shows that a $2,040 drop to $36,409 million in our imports of industrial supplies and materials was largely responsible for the October drop in imports, as our imports of crude oil fell by $1,076 million, our imports of fuel oil fell by $319 million, our imports of other petroleum products fell by $427 million, and our imports of fertilizers fell by $171 million...in addition, our imports of foods, feeds, and beverages fell by $430 million to $10,323 on a $147 million decrease in our imports of meat and smaller decreases in most other food imports...meanwhile, our imports of capital goods rose by $538 million to $49,822 on a $358 million increase in our imports of telecommunications equipment and a $352 million increase in our imports of civilian aircraft, our imports of automotive vehicles, parts, and engines rose $287 million to $29,076 million, and our imports of consumer goods rose $245 million to $51,707 on increases of $704 million in our imports of cell phones, $511 million in our imports of artwork and antiques, and $265 million in our imports of gem diamonds, which were partially offset by decreases of $279 million in our imports of footwear and $204 million in our imports of pharmaceutical preparations...in addition, our imports of goods not categorized by end use rose by $232 to $7,376 million...

to assess the impact of October trade on 4th quarter growth figures, we must first adjust the value of October imports and exports for inflation and then compare those figures to the similarly adjusted 2nd quarter figures...exhibit 10 in the pdf for this report gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here...from that table, we find that 3rd quarter real exports of goods averaged 120,999 million monthly in 2009 dollars, while inflation adjusted October exports were at 119,660 million in the same 2009 dollar quantity index representation...annualizing the change between the two figures, we find that 4th quarter real exports are running at a 4.5% annual rate below those of the 3rd quarter, or at a pace that would subtract about 0.36 percentage points from 4th quarter GDP....in a similar manner, we find that our 3rd quarter real imports averaged 179,814 million monthly in chained 2009 dollars, while inflation adjusted October imports were at 179,987 million...that would indicate that so far in the 4th quarter, our real imports have increased at a 0.39% annual rate over those of the 3rd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their 0.39% rate of increase would subtract another 0.05 percentage points from quarter GDP...hence, if October trade figures are maintained throughout the 4th quarter, our deteriorating balance of trade in goods would subtract about 0.41 percentage points from the growth of 4th quarter GDP...note that we have not computed the impact of the change in services here because we don't have access to their price changes...

in addition to the revision to the September trade data, this report also indicates revisions to trade for each of the months from April to August, which would thus also revise GDP for the 2nd quarter and the 3rd quarter...revisions to 2nd quarter data will not be made until the next annual revision, which wont be until next summer, but the revisions to third quarter trade will be incorporated into the 3rd estimate of 3rd quarter GDP, which will be released on the 22nd of this month...this report indicates that the trade deficit for September was revised from $40,812 million to $42,457 million (see table 1, pdf) and also indicates that the trade deficit for August was revised from $48,017 million to $48,811 million, while the trade deficit for July was revised from $41,807 million to $42,433 million (NB: last month's pdf is here)...that gives us a total increase in the trade deficit of $3,065 million for those months vs previously published figures, or worsening of the trade deficit for the quarter at a $12.3 billion annual rate...such a further deterioration of our third quarter trade would subtract another 0.07 percentage points from previously published GDP figures, even before counting any inflation adjustments...

October Construction Spending Up 1.0% on 1.0% Higher Costs

the October construction spending report (pdf) from the Census Bureau estimated that our seasonally adjusted rate of construction spending in October would work out to $1,107.4 billion annually if extrapolated over an entire year, which was 1.0 percent (±1.8%)* above the revised estimate of construction spending at a $1,096.6 billion annual rate in September and 13.0 percent (±2.5%) above the estimated annualized level of construction spending in October of last year...the annualized September spending estimate was revised up more than 0.2%, from $1,094.2 to $1,096.6 billion, and the annualized level of August construction spending was also revised up up more than 0.2%, from $1,087.5 billion to $1,089.8 billion, which together should add about 0.03 percentage points to the 3rd estimate of 3rd quarter GDP growth, when that report is released on December 22nd..

private construction spending was at a seasonally adjusted annual rate of $802.4 billion, 0.8 percent (±1.0%) above the revised September estimate, with residential spending rising 1.0 percent (±1.3%) to an annual rate of $399.0 billion while private non-residential construction spending rose 0.6 percent (±1.0%) to an annual rate of $403.4 billion, led by a 3.0% increase to $90,079 million in spending for manufacturing facilities.....meanwhile, public construction spending was estimated to be at a rate of $304.9 billion annually, 1.4 percent (±3.0%) above the revised September estimate, led by a 16.3% increase to $9,768 in spending for public safety and underpinned by a 1.1% increase to $94,072 million for highways and streets..

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments....however, gauging the actual impact of this October construction spending report on GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP must be adjusted for changes in price...the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators for the various components of non-residential investment, such as the Turner Construction building-cost indices for several types of buildings and the Engineering News Record construction cost index for utilities construction, while it specifies use of the Census Bureau construction price indexes for new one-family houses under construction and for new multi-family homes under construction for residential investment...that index, based on 2005 construction costs = 100, was at 114.3 in October, up from 113.9% in September, which suggests real residential construction rose 0.6% for the month, but more importantly was 1.7% higher than the inflation adjusted average of residential construction in the 3rd quarter months of July, August, and September...that would mean real residential investment has risen at a 7.2% annual rate so far in the quarter, a pace that could add about 0.24 percentage points to 4th quarter GDP....on the other hand, the 1.0% increase in the producer price index for final demand construction suggests that the October increase in non-residential construction spending was entirely due to higher prices, which would suggest that real construction was unchanged for the month and would contribute little to GDP...that's the way the Atlanta Fed saw it, as they reduced their estimate of the contribution of construction to 4th quarter GDP by 3 basis points with this release...

more importantly, then, this report indicated that the value of factory shipments fell by $2.5 billion or 0.5 percent to $475.2 billion, which followed a decrease of 0.3% in September, and hence factory shipments have now been down 6 out of the last 7 months...shipments of durable goods were down by 1.0%, unrevised from last week's durables report, as shipments of automobiles fell 6.4% and shipments of commercial aircraft were down 4.7%, leading to a 2.5% drop in overall shipments of transportation equipment...without the transportation sector, factory shipments were still 0.1% lower....the value of shipments (and hence "new orders") of non-durable goods rose by $45 million, which is considered statistically unchanged, as a 2.7% drop in shipments of agricultural chemicals was offset by a 2.2% increase in shipments from pulp, paper, and paperboard mills...however, since producer prices for foodstuffs, which account for 28% of non-durable factory shipments, were down 0.8%, and most other non-durable producers prices were down as well, real shipments of non-durable goods were certainly much higher than the nominal value would lead us to believe...

meanwhile, the aggregate value of October factory inventories, which have been down 4 months in a row, fell by $0.6 billion or 0.1 percent to $643.6 billion, following a revised 0.5% decrease in September...inventories of durable goods, down five of the last six months, fell by $1.0 billion or 0.3 percent to $397.0 billion, revised from the 0.2% drop reported last week, as the value of inventories of primary metals, which were priced 1.0% lower, fell $0.3 billion or 0.9 percent to $35.7 billion...the value of non-durable goods' inventories rose $0.4 billion or 0.2 percent to $246.5 billion, their first increase in 4 months, following a decrease of 0.4% in September...the value of inventories of petroleum and coal products, which increased for the first time in 4 months, drove the increase in non-durables, as they rose by $0.5 billion or 1.4 percent to $34.1 billion, which is likely a real increase as October energy prices were flat...similarly, since producer prices for goods fell 0.4% in October, real factory inventories would have increased by around 0.3%, suggesting a small boost to 4th quarter GDP....meanwhile, the revision of September factory inventories from the previously reported $645.1 billion to $644.1 billion with this report should result in a downward revision to 3rd quarter GDP on the order of 2 or 3 basis points...

note on the graphs used here

in March a year ago the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs before then...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all created and stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....